The Cen­tral Bank re­port­ed yes­ter­day that, based on da­ta from the Cen­tral Sta­tis­ti­cal Of­fice, the T&T econ­o­my grew by 3 per cent in the first quar­ter of 2023, re­flect­ing strong ex­pan­sion in the non-en­er­gy sec­tor (4.2 per cent) ac­com­pa­nied by mar­gin­al growth in the en­er­gy sec­tor (0.3 per cent).

“In the sec­ond quar­ter of 2023, in­di­ca­tors mon­i­tored by the Cen­tral Bank point to a steady rise in ac­tiv­i­ty in ma­jor non-en­er­gy sec­tors in­clud­ing trans­porta­tion and stor­age, whole­sale and re­tail trade (ex­clud­ing en­er­gy), elec­tric­i­ty and wa­ter (ex­clud­ing gas) and con­struc­tion,” said the Cen­tral Bank in its quar­ter­ly Mon­e­tary Pol­i­cy An­nounce­ment.

The growth in the T&T econ­o­my oc­curred as there was the “steady growth mo­men­tum in cred­it” con­tin­ued in the sec­ond quar­ter of 2023 as over­all fi­nan­cial sys­tem cred­it grew by 7.8 per cent in the twelve months to June 2023, up from 6.4 per cent in March 2023.

The main loan sub­cat­e­gories all ac­cel­er­at­ed—busi­ness lend­ing to 7.3 per cent, con­sumer loans to 8.1 per cent and re­al es­tate mort­gage loans to 6.3 per cent (all year-on-year).

The Cen­tral Bank al­so re­port­ed that bank­ing sys­tem liq­uid­i­ty re­mained el­e­vat­ed thus far for the year, with com­mer­cial banks’ re­serves at the Cen­tral Bank in ex­cess of re­quired lev­els reach­ing a dai­ly av­er­age of $6.3 bil­lion by the end of Au­gust 2023.

While the do­mes­tic econ­o­my showed signs of growth, the Cen­tral Bank not­ed that head­line in­fla­tion eased fur­ther in Au­gust 2023 to 4.1 per cent (year-on-year), down from 4.7 per cent record­ed in Ju­ly 2023.

“The de­cel­er­a­tion in head­line in­fla­tion came from slow­er price move­ments in food as core in­fla­tion re­mained un­changed. Food in­fla­tion slowed to 5.6 per cent while core in­fla­tion (which ex­cludes food items) re­mained at 3.7 per cent,” ac­cord­ing to the bank.

The in­sti­tu­tion not­ed that head­line in­fla­tion in many coun­tries de­clined on ac­count of low­er food and en­er­gy com­mod­i­ty prices along with the eas­ing of sup­ply chain is­sues.

It not­ed that sev­er­al cen­tral banks paused in­ter­est rate hikes at the end of the third quar­ter of 2023—for ex­am­ple, in Sep­tem­ber 2023, the Unit­ed States Fed­er­al Re­serve (Fed) main­tained its fed­er­al funds tar­get range of 5.25 per cent to 5.50 per cent and the Bank of Eng­land al­so kept its bench­mark rate un­changed.

At the same time, the Fed sig­nalled that the tight­en­ing cy­cle may not be at an end as in­fla­tion was still above tar­get lev­els.

Ac­cord­ing to the T&T Cen­tral Bank: “The dif­fer­en­tial be­tween short term in­ter­est rates in Trinidad and To­ba­go and the Unit­ed States nar­rowed as do­mes­tic rates edged up and the Fed paused its rate in­creas­es — the dif­fer­en­tial on 3-month trea­suries (TT/US) reached -464 ba­sis points in Au­gust 2023 from -476 ba­sis points in May 2023.

“Mean­while on the longer term, the 10-year dif­fer­en­tial moved to +107 ba­sis points from +153 ba­sis points over the same pe­ri­od.”

In T&T, the un­em­ploy­ment rate in­creased to 4.9 per cent in the first quar­ter of 2023 from 4.7 per cent in the fourth quar­ter of 2022.

The Cen­tral Bank not­ed that its Mon­e­tary Pol­i­cy Com­mit­tee (MPC), which sets the re­po rate, not­ed the con­tin­ued un­cer­tain­ty on the glob­al in­fla­tion front and the im­pact that fu­ture mon­e­tary tight­en­ing may have on the TT/US in­ter­est dif­fer­en­tial.

“The Com­mit­tee con­sid­ered that do­mes­ti­cal­ly, the buoy­an­cy in pri­vate sec­tor cred­it, along­side the sus­tained de­cel­er­a­tion in in­fla­tion, were help­ing to fos­ter a steady re­vival of eco­nom­ic ac­tiv­i­ty with­out de­mand pres­sures at this time.

“Tak­ing all fac­tors in­to con­sid­er­a­tion, the MPC agreed to hold the re­po rate at its cur­rent lev­el of 3.50 per cent,” said the Cen­tral Bank not­ing that it would con­tin­ue to care­ful­ly mon­i­tor and analyse in­ter­na­tion­al and do­mes­tic de­vel­op­ments and will take fur­ther ac­tions as nec­es­sary.

The next Mon­e­tary Pol­i­cy An­nounce­ment is sched­uled for De­cem­ber 29, 2023.